## US Home Sales Remain Sluggish in August Despite Declining mortgage Rates
Despite a late-summer dip in mortgage rates, US home sales experienced continued sluggishness in August, reflecting ongoing affordability challenges and limited inventory. The National Association of realtors (NAR) reported a constrained market, even as indicators suggest a potential for enhancement in the coming months.
The Federal Reserve’s decision last week to cut its main interest rate – the first in a year - offered some relief, but borrowing costs remain elevated for many prospective buyers. The U.S. median home sales price currently stands 52% higher than in August 2019, pre-pandemic.
“Though, mortgage rates are declining and more inventory is coming to the market, which should boost sales in the coming months,” noted Lawrence Yun, NAR’s chief economist.
Homes purchased last month likely went under contract in June and July, when the average 30-year mortgage rate fluctuated between 6.85% and 6.72%, as reported by Freddie Mac. This decline accelerated in August, with rates falling as low as 6.26% last week.
New home sales showed a brighter spot,jumping 20.5% in August to a seasonally adjusted annual rate of 800,000 units, according to the U.S. Census Bureau. This represents a 15.4% increase year-over-year, the strongest pace of the year, though still 1.4% lower than August of the previous year. However, new home sales constitute a small portion of the overall market.
The broader housing market continues to be hampered by affordability issues and a persistent shortage of homes, especially at the lower price points. This disproportionately impacts first-time homebuyers, who now account for 28% of sales – substantially lower than the ancient average of 40%.
Inventory has been gradually increasing as the market cools. At the end of last month, there were 1.53 million unsold homes, a 1.3% decrease from July but an 11.7% increase from August of the previous year, according to NAR. This translates to a 4.6-month supply at the current sales pace, matching July’s level and up from 4.2 months in August 2023. A 5- to 6-month supply is generally considered a balanced market.
Properties are also staying on the market longer, with the typical home remaining listed for 31 days in august, compared to 26 days a year earlier. This extended time on the market is putting pressure on sellers to offer better deals, leading to price reductions. Realtor.com reported that just over 20% of homes on the market in August had their initial listing price lowered.
While easing mortgage rates could attract more buyers, economists generally predict the average 30-year mortgage rate will remain above 6% for the remainder of the year.”Despite improvement, rates are still not low enough to unlock the vast majority of homeowners, who continue to enjoy sub 6% rates, but it will help those on the margins and may lead to a more active fall home sales season,” said Danielle Hale, chief economist at Realtor.com.
